Commando Trader: Futures and Commodities Daily commentary

[Commando Trader]

June 28, 2005
Scheduled Economic Reports for Wednesday!

GDP-Finale (Q1) 7:30am CT.
Chain Deflators-Finale (Q1) 7:30am CT.
API & DOE Oil and Gas Stock 9:30am CT

Stories and Comment:
Oil prices fell 4 percent as hedge fund speculators took profits from an all-time high above $60. U.S. crude traded $2.54 lower at $58 a barrel, having set a record at $60.95 on Monday on the New York Mercantile Exchange. Oil demand in the United States and Asia has held strong in the face of high fuel costs, encouraging traders to test the upper limits of what consumers will pay for. But U.S. Treasury Secretary John Snow said there was no doubt now that inflated fuel costs were hurting the U.S. economy, though not enough to halt or reverse recovery. "Clearly, it's hurting," Snow said in an interview on CNBC television. "I don't see it derailing the strong recovery we're in ... but it does take a few tenths of a (percentage) point off GDP growth, that's for sure." A buying surge by speculative funds has pushed prices up almost by a third since May amid growing fears of a global strain on production and refining capacity, especially in the fourth quarter, when demand for heating oil peaks. The only thing that can halt oil's rise is evidence it is damaging the global economy or funds taking profits. The Organization of the Petroleum Exporting Countries, already pumping crude near the highest level in 25 years, could decide this week to raise output limits by half a million barrels per day. But the cartel has repeatedly said more crude may not help cool prices, which are being driven by possible shortages of refined products. U.S. crude stocks are near six-year highs reached earlier this summer. Data due on Wednesday is expected to show U.S. crude stocks fell last week, while stocks of distillates, including heating oil and diesel, are forecast to have risen 1.6 million barrels.

The Dow Jones industrial average (up 114.32 to 10,405.10) and the Nasdaq composite (up 25.36 to 2,070.56) both jumped more than 1 percent, according to early tallies. The Standard & Poor's 500 (up 10.79 to 1,201.48) index added 0.9 percent. Treasury prices slipped, boosting bond yields, while the dollar gained versus other major currencies. The stock advance was broad. All but two of the 30 blue chips that comprise the Dow gained on the session, led by United Technologies (up $1.33 to $52.85), GM (up $0.93 to $34.40), Home Depot (up $0.79 to $39.26) and IBM (up $1.34 to $75.22). The Conference Board's June consumer confidence index, which jumped to 105.8 from an upwardly revised 103.1 in May, topping forecasts and hitting a three-year high. Confidence is closely watched since consumer spending fuels about two-thirds of the economy. Meanwhile, investors are awaiting Thursday's statement from the Federal Reserve. The Fed concludes its two-day policy meeting that day, and with another quarter-point rate hike widely expected, the Fed's language will be closely watched for hints about what the central bank will do next. A rate hike would be the ninth in a row.

In corporate news, a potential chip war heated up, after Advanced Micro (up $0.88 to $17.53) filed a lawsuit against larger rival Intel (up $0.47 to $26.33), saying the No. 1 computer chipmaker has an illegal monopoly in the microprocessor market. Shares of both companies rose, with AMD gaining nearly 3 percent. A variety of big-cap tech names popped, including Oracle (up $0.32 to $12.86), due to report fiscal fourth-quarter earning Wednesday. Blue chips also got a boost from the home building sector, which gained across the board. The Philadelphia Housing Sector index rose over 2 percent. Market breadth was positive. On the New York Stock Exchange, winners trounced losers by more than two to one as 1.02 billion shares changed hands. On the Nasdaq, advancers topped decliners by more than two to one on volume of 1.26 billion shares. Treasury bonds slumped, raising the yield on the 10-year note to 3.97 percent from 3.90 percent late Monday. Treasury prices and yields move in opposite directions. COMEX gold fell, losing steam along with other dollar-traded commodities. Gold dropped $4 to $437.70 an ounce.

Good Luck!

 

[TATrader]

Insightful reading with a good synopsis of the international commodities market.

 

[Commando Trader]

Insightful reading with a good synopsis of the international commodities market.

Thanks TATrader...

I will try to keep posting our twice daily commentary. But I am sure you understand it can be difficult at times with trading and all

 

[Saint]

Thanks TATrader...

I will try to keep posting our twice daily commentary. But I am sure you understand it can be difficult at times with trading and all

Looking forward to it.....and thanks!

 

[Commando Trader]

July 05, 2005 - Morning Comments

Stories and Comment:
New orders at U.S. factories rose 2.9 percent in May, exactly in line with analyst expectations, on an aircraft-led jump in durable goods. The increase was the largest factory orders gain in more than a year, and followed a slightly downwardly revised 0.7 percent advance in April. Much of the factory orders strength came from durable goods -- big-ticket items meant to last three years or more -- which rose 5.5 percent. Durables, which make up more than half of factory orders, surged in May after Boeing reported 200 new aircraft orders in the month. Markets showed little reaction to the factory goods data, which was previewed in large part in the preliminary report on durables issued last month. Transportation equipment orders roared ahead 21.2 percent in May. Excluding the volatile transportation sector, total factory orders fell 0.1 percent. We had a lot of transportation gains. It seemed to be on the weak side once you stripped out the aircraft orders. The report contrasting with an Institute for Supply Management survey published on Friday, which showed the U.S. manufacturing sector growing quickly in June despite soaring energy prices. Non-defense capital goods excluding aircraft fell 2.5 percent in May, the weakest reading for the key measure of business confidence since October 2004. The fall erased a 1.7 percent April gain in the category. Strong aircraft orders had plumped the factory orders report enough to make it a difficult gauge. When you look at ex-aircraft, there is weakness after the big surge in factory orders at the turn of the year into the first quarter. May orders for nondurable goods rose a paltry 0.1 percent. Factory inventories were unchanged in May, the government said. The inventories-to-shipments ratio, a measure of how quickly stocks would run out at the current shipment pace, was also unchanged at 1.24 months' supply.

Wall Street's attention will shift from worrying about oil and the Federal Reserve to tracking corporate profits this week as U.S. companies prepare quarterly results -- and possibly warn investors if they expect to miss consensus. Investors also will zero in on Friday's report on U.S. employment, which is expected to show the addition of 188,500 non-farm jobs in June, compared with just 78,000 jobs in May. Earnings forecasts, though, have the most potential to set Wall Street's nerves on edge in the coming week. We're seeing an increase in guidance downward, not negative earnings, but a reduction in earnings growth rates. According to the most current Estimates data, 27 percent of the 242 U.S. companies that had pre-released second-quarter earnings warned they would miss estimates, compared with 22.9 percent who had revised upward as of June 24. The trend speaks more to efforts by corporations to manage their stock prices than to an economic slowdown. They've learned the lesson that if you have earnings exceed expectations by a nickel; it appears to be a nonevent. But if you under perform by a nickel, it is very punitive. For the week, the blue-chip Dow Jones industrial average edged up 0.05 percent, while the broad Standard & Poor's 500 Index added 0.24 percent and the Nasdaq Composite Index gained 0.20 percent.

Oil prices climbed past $59 a barrel as the hurricane season in the United States added to worries stocks will fail to build in time for peak fourth-quarter demand. U.S. oil prices gained 55 cents to $59.30, adding to gains late last week that halted a three-day fall from the all-time high of $60.95. Traders were nervously monitoring the latest weather forecasts in the United States after the National Hurricane Center in Miami issued a warning a tropical depression had strengthened into Tropical Storm Cindy, potentially threatening oil infrastructure in the Gulf of Mexico. It adds to existing concerns about fourth quarter shortages. Even people who have been bearish prefer to sit on the sidelines, rather than to sell. U.S. crude oil inventories are close to their highest level for six years, but below-average stocks of distillates -- including high-demand fuels such as diesel and heating oil -- have fostered doubts about refiners' ability to meet peak demand in the fourth quarter. The focus on oil products has blunted efforts by the Organization of the Petroleum Exporting Countries (OPEC) to soothe supply worries by pumping more than 30 million barrels per day (bpd), the highest in 25 years. OPEC last week suspended talk of increasing production by a further 500,000 bpd, a decision analysts said had limited impact in a market supported by refinery bottlenecks rather than a shortage of crude.

Treasuries extended losses as weaker euro zone government bonds cast a shadow over the market after Monday's Independence Day holiday. A surprisingly strong manufacturing report Friday reinforced the view that the Fed would keep steadily tightening monetary policy, and this drove bonds to break through key technical levels, exacerbating the move downwards. Traders said the move was a continuation from Friday, adding that Treasurys were also moving in sympathy with bonds, which were losing ground. Euro zone debt took a beating today on the back of firmer data and after a news service report that markets should not expect a rate cut soon from the European Central Bank. It's on the back of that market news story about ECB not cutting rates, and then European markets traded down and the U.S. followed suit. Two-year yields were at 3.78, having earlier hit their highest level in more than three months above 3.8 percent. The two-year note price was last trading down 2/32. The 10-year note was down 6/32, lifting the yield to 4.074 percent, compared to 4.04 Friday. Five-year yields were at 3.87 percent, compared to 3.83 Friday. Meanwhile, the ultra-long 30-year debt yield was at 4.34 percent, compared to 4.30 Friday. The September T-note future was down 11/32 at 112-14/32, just short of earlier two-week lows.

Stocks rose, as retail issues jumped after Wal-Mart Stores Inc. reported better-than-expected preliminary June sales, but oil prices limited gains on concerns that higher fuel costs would shrink corporate profits. The Dow Jones industrial average was up 41.17 points, or 0.40 percent, at 10,344.61. The Standard & Poor's 500 Index was up 5.83 points, or 0.49 percent, at 1,200.27. The technology-laced Nasdaq Composite Index was up 13.88 points, or 0.67 percent, at 2,071.25. Procter & Gamble Co. and Gillette Co. slipped on reports the European Union will extend a probe into P&G's proposed $55 billion acquisition of Gillette. An EC spokesman said the commission has not yet made a decision. Shares of Procter & Gamble, a Dow component, fell 1.7 percent to $51.99, while Gillette sank 2.3 percent to $49.59. Oil is dominating the tape and is a negative for the overall market. Wal-Mart climbed 3 percent to $49.71 after the world's biggest retailer estimated over the weekend that June sales rose a better-than-expected 4.5 percent at U.S. stores open at least a year, its biggest monthly gain in 13 months. The S&P retail index rose 1.33 percent.

Support and Resistance:
S&P`s: Day-Trade (Sept.)
Support starts out at 1194.30, 1190.00 with major at 1185.20.
Resistance comes in at 1200.50, 1207.30 with major at 1211.50.

Bonds: (Sept.)

Support starts out at 117-19 with major at 116-30.
Resistance comes in at 118-00 with major at 118-17.



NASDAQ: (Sept.)
Support starts out at 1489.00, 1477.00 with major at 1470.00.
Resistance comes in at 1499.00, 1510.00 with major at 1523.00.

Dow Jones: (Sept.)
Support starts out at 10,299 with major at 10,274.
Resistance comes in at 10,360 with major at 10,401.


Commando Trader
www.commandotrader.com
Good Luck!

 

[Commando Trader]

July 05, 2005 - After Market Commentary

Scheduled Economic Reports for Wednesday!

ISM Services (June) 9:00am CT.

Stories and Comment:
Optimism buoyed stocks today, with investors finding reassurance in a strong read on factory orders and Wal-Mart's upbeat June sales guidance. Higher oil prices and Treasury yields weighed on stocks at the open, but the tone soon turned positive, as investors focused on upbeat corporate news and a strong read on factory orders. You would think that with oil so high, we would be seeing some pressure, but traders think the strong read on factory orders turned things around, as it reassures people that the economy continues to strengthen. And that's reassurance investors certainly need, after a brutal first quarter for the market and a mixed second quarter. Technically, Friday was the first day of the third quarter and second half of the year, but few were around to act on it, ahead of Monday's Independence Day holiday, when financial markets were closed. As such, today became the de facto kickoff to the second half, and seemed to bring out some new buyers, as tends to be typical. The start of the second half often brings new money into retirement funds, making the first full week of July often an upbeat one, according to Stock Traders Almanac. Strength in chips, Internet shares and software helped boost the Nasdaq, while blue chips benefited from a surge in retail and oil services stocks. Stocks managed modest gains Friday at the end of a tough period last week as investors digested skyrocketing oil prices and the ninth consecutive interest-rate hike from the Federal Reserve. While today's action was positive, investors are focused on the key events due later in the week -- including the June jobs report and earnings from Alcoa, which marks the unofficial start of the earnings reporting period. Second-quarter earnings for the S&P 500 are currently on track to rise about 7 percent versus the same period a year ago, the slowest growth in three years. Market breadth was positive. On the New York Stock Exchange, winners beat losers five to three as 1.04 billion shares changed hands. On the Nasdaq, advancers topped decliners three to two as 1.11 billion shares traded.

Oil prices leapt back towards $60 a barrel as the hurricane season in the United States added to worries stocks will fail to build in time for peak fourth-quarter demand. U.S. light crude for August delivery gained $1.50 to $59.80, adding to gains late last week that halted a three-day fall from the all-time trading high of $60.95. Brent crude on London's International Petroleum Exchange rose 48 cents to $58.42 a barrel, extending gains on Monday when the U.S. market was shut for Independence Day. Traders were nervously monitoring the latest weather forecasts in the United States after the National Hurricane Center in Miami issued a warning a tropical depression had strengthened into Tropical Storm Cindy, potentially threatening oil infrastructure in the Gulf of Mexico. Oil majors Chevron and Shell said they had evacuated some workers because of the storm, but production was not affected. It adds to existing concerns about fourth quarter shortages. Even people who have been bearish prefer to sit on the sidelines, rather than to sell. News of the storm had a bigger impact on product futures than on crude, driving U.S. heating oil futures to a record of $1.7580 a gallon. They eased very slightly from that peak to trade 3.79 cents higher at $1.7480. U.S. crude oil inventories are close to their highest level for six years. But distillate stocks -- including high-demand fuels such as diesel and heating oil -- are at the lower half of the average range for the time of year, fostering doubts about refiners' ability to meet peak demand in the fourth quarter. The focus on oil products has blunted efforts by the Organization of the Petroleum Exporting Countries to soothe supply worries by pumping more than 30 million barrels per day, the highest in 25 years. OPEC last week suspended talk of increasing production by a further 500,000 bpd, a decision analysts said had had limited impact in a market supported by refinery bottlenecks rather than a shortage of crude.

Ford Motor Co. bowing to pressure from General Motors Corp. said that it was matching its larger, cross-town rival's employee discount program. Under the program, which takes effect on Wednesday and will be called the "Ford Family Plan," Ford will shave thousands of dollars off the sticker prices of most 2005 model vehicles. The program will run through Aug. 1, he said. Like the GM plan, Ford will sell its vehicles to anybody at the same low prices Ford employees pay. It's a great deal that we're going to deliver in a simple, consistent way to customers. "We're going to advertise this widely, in a huge significant way throughout the month." The Chrysler unit of Daimler Chrysler has said it will respond to GM's program by rolling out its own employee-pricing program on Wednesday. GM's "Employee Discount for Everyone" program was launched last month and the company extended it through Aug. 1 earlier today. It drove GM's sales up 41 percent in June, which was the company's best sales month in 19 years. Ford, which has seen its U.S. sales fall for 13 consecutive months, can ill afford not to remain competitive with GM. It has already warned that its core automotive operations may not be profitable this year.

The U.S. Securities and Exchange Commission will ask a federal judge on Thursday to allow its civil case against Richard Scrushy, former chief executive of Health South Corp. to go forward, an SEC spokesman said on today. In March 2003 the SEC filed accounting fraud charges against Health South and Scrushy. A federal judge ended up denying the SEC's civil injunction request to freeze Scrushy assets but the company agreed last month to pay $100 million to settle with the SEC. The SEC will argue its case against Scrushy in documents to be filed in a federal court in Alabama in response to a judge who asked last week why the SEC should be allowed to pursue its civil case. "We intend to pursue our case against Mr. Scrushy," SEC spokesman John Nester said. If the judge accepts the SEC's argument, it could mark round two for Scrushy who won a major victory in the criminal case against him last week in which a federal jury found him not guilty of orchestrating the $2.7 billion accounting fraud at the medical rehabilitation chain he founded. He was found not guilty of all 36 charges he faced, including conspiracy, mail fraud, making false statements, securities and wire fraud, and money laundering.

Good Luck!


Commando Trader
www.commandotrader.com

 

[Commando Trader]

July 06, 2005- Morning Commentary

Stories and Comment:
U.S. chain store retail sales rose in the latest week, as consumers shopped for clearance items and seasonal goods during the Fourth of July holiday weekend. Sales rose 0.5 percent in the week ended July 2, compared with a 0.6 percent decline the previous week. Compared with the same week a year ago, sales slowed to a 3.8 percent increase after a 4.2 percent rise the preceding week. Consumers celebrated America's birthday by shopping for seasonal goods and summer clearance items this past weekend, which helped to lift overall sales for the month. At the moment, the 'retail stars' are aligned for solid sales performance as the industry continues to face easier comparisons, better seasonal weather and improving consumer confidence. For June, "the ICSC expects monthly comp-store sales performance will increase by at least 4.5 percent -- the strongest since February's 4.7 percent increase and maybe the strongest reading since May 2004 (+5.7 percent). The ICSC-UBS Weekly Chain Store Sales Snapshot is compiled from a group of major discount, department and chain stores across the country that report their weekly results.

U.S. firms planned the highest number of layoffs in June since January 2004, led by the automotive and retail industries. Employment consulting firm Challenger, Gray & Christmas Inc. said employers announced 110,996 jobs cuts last month, up from 82,283 in May, and 73 percent higher than June 2004. The cuts are not necessarily an indication of economic weakness, but rather the by-product of numerous trends, including changing consumer demand, outsourcing, mergers and acquisitions, automation and consolidation. The report said job cuts have been rising in 2005 despite other report showing economic growth and job gains. The data comes a few days before the government releases its non-farm payroll data for June, which according to economists, is expected to be 188,500. We are also starting to see job cuts resulting from higher health care costs as well as higher oil and natural gas prices.

Crude oil prices rose back above $60 a barrel amid concerns about U.S. supply disruptions as a tropical storm forced oil companies to evacuate rigs in the Gulf of Mexico. While parts of the oil market appear to be amply supplied, there is still concern about reliable and timely delivery. Light, sweet crude for August delivery was up $1.26 to $60.85 a barrel on the New York Mercantile Exchange. Heating oil rose nearly 3 cents to $1.7599 a gallon (3.8 liters) while gasoline was up nearly three and a half cents at $1.7160. Tropical Storm Cindy forced at least 23 petroleum production platforms and six drilling rigs to be evacuated, interrupting more than 3 percent of the Gulf of Mexico's normal oil and natural gas production. Traders remembered last year's Hurricane Ivan, which forced oil platforms across the Gulf of Mexico to shut down, causing production bottlenecks and sending prices up as the Northern Hemisphere was gearing up for winter heating oil production. Memories are still strong of the severe and lasting damage done along the U.S. Gulf Coast by Hurricane Ivan last autumn, and the fear is that another heavy season of tropical storms will batter this key-producing region again this year. Another storm, Dennis, is following close behind Tropical Storm Cindy.

Though neither is expected to develop into a hurricane, the prospect of consecutive storms hitting the region is keeping the market on edge. The market's strong price response to this weather threat again underscores how tightly balanced and vulnerable the entire energy supply system is. Traders were also watching for Thursday's Department of Energy report from the U.S. for supply indications from the world's largest energy consumer. The market was expecting drops in U.S. crude and gasoline stocks with a build in distillate stocks. Energy futures have been supported for almost two years by strong demand and worries about limited excess capacity in oil production and refining around the globe. Concerns about terrorism, the war in Iraq and labor strife in oil-producing nations such as Nigeria and Norway have also fed fear into the market. The Organization of Petroleum Exporting Countries said last week that world oil demand will rise to 85.9 million barrels a day in the fourth quarter, or 150,000 barrels more than forecast a month earlier. Year-to-date total product demand, including gasoline, distillate and jet fuel, is up 2.8 percent compared to the same period last year. Crude futures are about 50 percent above year ago levels, though still below the inflation-adjusted high above $90 a barrel reached in 1980.

Stocks opened lower as oil prices rose above $60 a barrel and investors awaited June data for clues on the health of the services sector, which accounts for a big chunk of the nation's economy. The Dow Jones industrial average was down 6.60 points, or 0.06 percent, at 10,365.20. The Standard & Poor's 500 Index fell 0.79 points, or 0.07 percent, at 1,204.20. The technology-laced Nasdaq Composite Index slipped 1.67 points, or 0.08 percent, at 2,077.08. Bonds moved higher as a fresh spike in crude renewed fears that high-energy prices could weigh on economic growth and the market awaited results from a non-manufacturing business index. The dollar edged lower against the euro but gained on the yen. The benchmark 10-year note rose 7/32 of a point to 100-12/32, to yield 4.07 percent, down from 4.11 late Tuesday, while the 30-year bond added 12/32 of a point to yield 4.34 percent, down from 4.37 in the previous session. Treasury prices and yields move in opposite directions. The five-year note gained 3/32 to yield 3.86 percent, and the two-year note edged higher 1/32 to yield 3.76.

The Institute of Supply Management releases its non-manufacturing index for June at 10 a.m. ET, with analysts surveyed by Briefing.com forecasting a small drop to 58.0 from 58.5 in May. Any reading greater than 50 means the economy is expanding. Traders said they are likely to pay extra attention to the employment component of the survey, as it comes two days before the June non-farm payrolls report, seen as the centerpiece of this week's economic reports. The ISM employment component will certainly get some attention. But the payrolls indicator (on Friday) is the really big number. Traders also bought bonds after oil prices jumped back above $60 on the perception that rising energy costs could hurt corporate profits and slow economic growth.

Support and Resistance:

S&P`s: Day-Trade (Sept.)
Support starts out at 1204.00, 1200.50 with major at 1195.70.
Resistance comes in at 1211.50, 1216.00 with major at 1222.10.

Bonds: (Sept.)
Support starts out at 116-30 with major at 116-10.
Resistance comes in at 117-16 with major at 118-00.

NASDAQ: (Sept.)
Support starts out at 1510.00, 1499.00 with major at 1487.00.
Resistance comes in at 1519.00, 151527.00 with major at 1535.00.

Dow Jones: (Sept.)
Support starts out at 10,355 with major at 10,299.
Resistance comes in at 10,401 with major at 10,438.

Good Luck!

Commando Trader
www.commandotrader.com

 

[Commando Trader]

July 06, 2005 - Afternoon Commentary
Scheduled Economic Reports for Thursday!

Initial Claims-Weekly 7:30am CT.

API & DOE Oil and Gas Stocks 9:30am CT.

Stories and Comment:
Oil prices hit a record $61 a barrel as a tropical storm shut refinery units in Louisiana and an approaching storm compounded worries over refiners' ability to bolster pre-winter fuel supplies. U.S. crude rose as high as $61.35 per barrel, the highest price for oil futures since they began trading in the early 1980s. It later traded $1.71 higher at $61.30 per barrel. Tropical Storm Cindy slowed into a depression on Wednesday after hitting land, but not before knocking down transmission lines in Louisiana, briefly shutting refinery units and leading to minor production cuts at five refineries in the state. Oil companies also eyed Tropical Storm Dennis in the Caribbean, which the National Hurricane Center said could strengthen into a hurricane later in the day, and hit the Gulf of Mexico by the weekend. The hurricane threat has certainly raised people's fears of refiners struggling to produce enough products, particularly at a time when demand for gasoline is high. Cindy also caused the closure of a small volume of production in the Gulf of Mexico, home to a quarter of U.S. oil and gas output. The U.S. federal Minerals Management Service said on Tuesday more than 3 percent of daily Gulf oil and gas production had been shut as energy companies evacuated some workers from platforms.

Hedge fund investors are betting peak winter demand will stretch supplies, particularly of heating oil and other high-demand distillate fuels. As oil grows ever more expensive, it seems that only a visible weakening of the global economy, with tangible evidence that demand for oil products is slowing, would convince market participants to sell. Oil markets may turn even more bullish if a forecast on weekly U.S. crude stocks is proved correct. Stocks are expected to have fallen by 1.1 million barrels. The Organization of Petroleum Exporting Countries last week suspended talk of increasing production by a further 500,000 bpd on top of an increase that came into effect this month. Despite the move back to above $60 a barrel; Iran said the group should wait before considering further action. In this situation, before anything, we should wait for the response of the market after the new increase that we had from the first of July. All in OPEC bar Saudi Arabia are already pumping at full capacity. While U.S. demand is running strong, the world's second-biggest oil consumer, China, has been showing signs of weaker-than-expected growth this year, data has shown. Major Chinese refiners, who have been exporting unusually large volumes of gasoline and diesel this year, have cut back operating rates in July as soaring crude costs turn their margins negative for low, state-set domestic retail sales.

U.S. job growth last month likely shook off May's doldrums, but economists said the unemployment rate probably didn't budge as spring graduates and other workers entering the labor force offset stronger hiring. Analysts believe the economy created 188,500 jobs in June, more than double the disappointing 78,000 gain in May. But predictions ranged widely, from an increase of 95,000 jobs to as many as 275,000, and experts warned June can be a volatile month because education-related jobs tend to decline while the hiring of college graduates surges. The unemployment rate is expected to be unchanged at 5.1 percent, since new job seekers will likely counterbalance the hiring growth. For many analysts, the biggest reason to expect a relatively large employment gain in June is simple: May's growth was small, and recent history shows a disappointment one month will be followed by stronger growth the next. Since June 2004, payroll gains have moved alternatively up and down each month. To keep that pattern intact, payrolls must move up in June. Since the start of the year, the seesaw pattern of job growth has been particularly acute: 124,000 in January, 300,000 in February, 122,000 in March, 274,000 in April, and 78,000 in May.

While the monthly employment report is adjusted to take into account things like weather and the school year, Dudley cautioned such seasonal factors might have been distorted by several consecutive years of below-average summer hiring. The myriad of economic reports that shed light on the strength of U.S. hiring has also offered mixed messages. The jobs measure of the Institute for Supply Management's services index surged to 57.4 from 53.4 in May, suggesting strong employment growth in the sector, which accounts for about 80 percent of the economy. It seems that the non-manufacturing sector improved in early summer after softness in the spring. Employment improved, which is consistent with our view that we will see a rebound in payrolls growth in June. But employment-consulting firm Challenger, Gray & Christmas said U.S. firms planned 110,996 job cuts last month, the highest since January 2004. Separately, a Department of Labor report last week suggested fairly robust job growth, showing new claims for unemployment benefits fell to 310,000 in late June, and its lowest level in more than two months. On balance, the labor market still appears to be ticking over ... with the six-month average payrolls gain running at 175,000 a month. That is more than enough to match the growth in the labor force, but not much more. Traders don't anticipate any marked departure from that trend over the summer months. Economists and Federal Reserve officials will also watch Friday's report for signs job growth is pushing wages higher -- which could spark inflation worries. Forecast a 0.2 percent increase in average hourly earnings, matching May's rise. The length of the workweek was expected to be unchanged at 33.8 hours.

Stocks slid with the blue-chip Dow average falling 1 percent as crude prices marched to a record high above $61 a barrel, fueled by fears that two tropical storms would pinch supply. The Dow Jones industrial average was down 103.27 points, or 1.00 percent, at 10,268.53 with less than 15 minutes to go until the closing bell. The Standard & Poor's 500 Index was down 9.78 points, or 0.81 percent, at 1,195.21. The technology-laced Nasdaq Composite Index was down 9.98 points, or 0.48 percent, at 2,068.77. The surge in oil prices capped a three-day run that raised the price of August crude futures by more than 8 percent to $61.28 at the close of trading on the NYMEX market. Shares of energy-sensitive industrial companies, including Caterpillar Inc. and United Technologies Corp. fell, weighing the Dow Jones industrial average.

Good Luck!


Commando Trader
www.commandotrader.com

 

[Commando Trader]

July 07, 2005

Stories and Comment:
The number of Americans filing new claims for jobless aid rose 7,000 last week, and a significant portion of the rise was due to temporary layoffs in the auto and school sectors. First-time claims for state unemployment insurance benefits rose to 319,000 in the week ended July 2 from a revised 312,000 in the prior week. Wall Street had forecast a rise to 319,000 from the original reading of 310,000 in the week ended June 25. A Labor Department analyst attributed a "significant portion" of the increase in claims to layoffs in the automobile industry, which has begun its annual shutdown for model changes, and to layoffs of temporary employees of the school system such as bus drivers and cafeteria workers. Many U.S. schools close for summer holidays. The closely watched four-week moving average of claims fell for the third straight week, slipping to 320,500 from 324,000 the previous week. That was the lowest level since March 5. The number of people who remained on the benefit rolls after drawing an initial week of aid fell 16,000 to 2.58 million in the week ended June 25, the latest week for which those data are available. A more comprehensive snapshot of the economy is likely to emerge on Friday with the Labor Department's release of the June employment report, which is expected to show a 188,500 increase in payroll jobs after a rise of just 78,000 in May. The unemployment rate is expected to remain unchanged at 5.1 percent.

U.S. shoppers snapped up summer clothing and air conditioners in June as a heat wave generated the strongest monthly sales growth since March 2004, calming concerns that steep energy prices slowed consumer spending. June is typically a month of clearance sales as retailers make room for back-to-school merchandise, but analysts said the strong summer demand meant many chains kept discounts to a minimum. This bodes well for quarterly profits. Consumers clearly shook off record-high oil and gas prices during June and flocked to the nation's retailers as consumer spending correlated nicely with significant gains in consumer confidence. Pent-up demand for summer apparel and seasonal merchandise due to poor May weather spilled into June and fueled sales. Overall, June sales at stores open at least a year -- a key retail measure known as same-store sales -- rose 5.4 percent, ahead of expectations for a 4.8 percent increase, according to Swampscott, Massachusetts-based Retail Metrics. That was the biggest gain since a 6.7 percent jump in March 2004. Retailers such as Target Corp. and J.C. Penney Co. Inc. raised quarterly earnings forecasts after their June sales handily beat Wall Street's expectations. Shares of both companies rose in early New York Stock Exchange trading. The Standard & Poor's retailing index was little changed, however, as deadly blasts on London's transit system rattled global stock markets. The companies that are selling the cool stuff are doing extraordinarily well. It reflects the U.S. consumers' willingness to trade up a little bit. They're looking for something at a medium price point rather than the entry price point. Thats a welcome change for discount chains, which had been under pressure in recent months as soaring gasoline prices curbed discretionary spending. Wal-Mart Stores Inc. reported its biggest sales gain in 13 months.

British interest rates stayed at 4.75 percent for the 11th month after a series of blasts killed several people in London, but economists said a cut next month was almost certain. Financial markets had fully priced in a quarter-point rate cut before the Bank of England's announcement because of the attack, but economists said the BoE probably wanted to wait for more information before acting. With the exact nature and implications of this morning's events in London unclear, the Monetary Policy Committee's reaction will likely have been to try and hold those events at arm's length. Given reports showing consumer spending slowing fast and manufacturing heading toward recession, most analysts had already expected the BoE would make a quarter point-cut in August, ending the cycle of rate hikes that started in November 2003. Short sterling interest rate futures, which had rallied in the wake of the London attacks, pared some gains after the BoE decision, but were still pricing in a cut next month. The pound also got back some of its losses. The FTSE-100 index of leading shares was down nearly 2 percent as transport and leisure stocks fell sharply on fears the slowdown in retail spending would extend to services. Economists said consumers -- already feeling the pain of five-interest rate hikes in the last 1-1/2 years and soaring oil prices -- might further rein in their spending because of worries about safety.

Stocks slid after a series of fatal blasts ripped through London's transport network, stoking security worries among investors. Breadth was negative, with decliners outpacing advancers by a 4-to-1 ratio on both Nasdaq and the New York Stock Exchange. Shares of airline companies and insurers were particularly hit hard, while stocks of security-related companies rose sharply. The Dow Jones industrial average fell 52.79 points, or 0.51 percent, at 10,217.89. The Standard & Poor's 500 Index was down 7.07 points, or 0.59 percent, at 1,187.87. The technology-laced Nasdaq Composite Index dropped 10.85 points, or 0.52 percent, at 2,057.80. In what the NYSE called heavier-than-normal volume, 240 million shares traded in the first half hour. The American Stock Exchange index of airlines dropped 2.5 percent, and the S&P index of insurance companies slipped 1 percent. Delta Air Lines fell 5.5 percent to $3.29, while insurer and Dow component American International Group declined nearly 1 percent to $58.56. Shares of security and video surveillance companies surged. Stock of Isonics Corp. a maker of portable devices that detects explosives, gained 10.2 percent to $3.34, and Digital Recorders Inc. which makes transportation, law enforcement and security communications systems, jumped 26.5 percent to $2.82.

President Bush said that Washington was willing to work with the European Union to abolish farm subsidies as early as 2010, but European officials responded skeptically. Top EU trade negotiator Peter Mandelson said it was time for all to deliver now in the Doha Round of international free trade negotiations, but his spokeswoman said 2010 looked unrealistic for a phase-out of farm subsidies. "We want to work with the EU to rid our respective countries of agricultural subsidies," Bush told reporters at a meeting of world leaders, where Britain was pressing rich nations to commit themselves to fairer trade with Africa. "I hope that by 2010 the Doha Round will achieve that objective," Bush said. That is a date Britain floated ahead of the Group of Eight summit that Prime Minister Tony Blair is chairing in Scotland -- but the British idea concerns export subsidies rather than aid for farmers as whole. French Farm Minister Dominique Bussereau defended the EU's Common Agricultural Policy, which eats up about 40 percent of the centralized EU budget, while a European Commission farm spokesman said the EU was already overhauling the CAP system. "In recent years we have been moving toward a much more trade-friendly farm policy and the Americans have been moving in the opposite direction," spokesman Michael Mann said. Mandelson, who negotiates on behalf of the 25-nation EU on trade issues and also says U.S. farm aid is rising, told BBC radio that people should stop posturing and agree on the next phase of trade liberalization. "Everything is far too urgent for plodding," he said. "I'm afraid there is too much circling around each other."

Support and Resistance:

S&P`s: Day-Trade (Sept.)
Support starts out at 1190.50, 1181.60 with major at 1174.00.
Resistance comes in at 1199.00, 1207.30 with major at 1211.50.

Bonds: (Sept.)

Support starts out at 117-09 with major at 116-20.
Resistance comes in at 118-00 with major at 118-24.

NASDAQ: (Sept.)
Support starts out at 1497.00, 1483.00 with major at 1477.00.
Resistance comes in at 1510.00, 1521.00 with major at 1534.00.

Dow Jones: (Sept.)
Support starts out at 10,251 with major at 10,199.
Resistance comes in at 10,300 with major at 10,337.

Good Luck!

Commando Trader
www.commandotrader.com

 

[Commando Trader]

July 07, 2005
Scheduled Economic Reports for Friday!



Unemployment and Non-farm payrolls (June) 7:30am CT.



Wholesale Inventories (May) 9:00am CT.



Consumer Credits (May) 2:00pm CT.



Stories and Comment:
Oil prices rebounded from heavy losses as dealers calculated the potential economic fall-out of attacks in central London was likely to be limited. U.S. crude traded at the close down 53 cents at $60.75 a barrel. Earlier, as it became clear that blasts on London's transport system were deliberate, crude fell from a record high of $62.50 to an intraday low of $59.05 a barrel. Initial concerns were that the attacks, thought likely by security experts to be the work of al Qaeda, might cause a fall in oil demand similar to that following the Sept. 11, 2001 attacks in the United States. The bombing in London highlights global growth concerns and any slowing of demand would be considered quite bearish. But as prices bounced back dealers said the economic impact looked likely to be limited. It is not 9/11 in its devastation or its impact on global demand. Therefore this sell-off will be very temporary. It was hard to draw conclusions yet more factors would have to come into play for theyre to be a lasting economic impact. Those factors would include further terrorist attacks in the next few days, signs of "notable deterioration" in consumer spending and a "major shift" from central banks on policy priorities.

Economists said the event appeared more akin to last year's Madrid bombings than the 9/11 attacks. A rise in U.S. stocks of distillate fuels, including heating oil and diesel, also helped undermine prices. Distillate inventories rose 4 million barrels to 117 million barrels in the week to July 1 on high refinery run rates. The increase lifted distillate inventories to a 3.2-million barrel surplus compared to a year ago, from an 800,000-barrel surplus last week. Dealers were also watching the approach of hurricane Dennis toward U.S. Gulf of Mexico oil facilities. Storms in the U.S. Gulf have compounded anxieties about the ability of stretched global crude production and refinery operations to meet demand. The season's first Atlantic hurricane, Dennis is on track for the oil and natural gas fields off Louisiana, Mississippi and Alabama and is expected to reach land by Sunday, the U.S. National Hurricane Center said. Tropical storm Cindy this week forced energy companies to shut in some 190,000 barrels per day (bpd) of output and some refinery units to close. Last September's hurricane Ivan knocked out 45 million barrels of Gulf output over several months and helped oil prices climb past $50 a barrel for the first time.

The Chicago Board Options Exchange's Market Volatility Index or VIX, is on the rise, a sign of mounting anxiety among investors after several explosions in London rattled financial markets. This barometer of investor sentiment, also known as Wall Street's "fear gauge" popped up today as investors bid up options to manage their stock market risks or take advantage today's broad swings in the underlying indexes. The VIX, a near-term forecast of stock market volatility based on the Standard & Poor's 500 index option prices, on Thursday came off its recent lows to 13.33, up 8.64 percent. The sentiment indicator spent most of the past month between 13.00 and 11.00, near historical lows. There is certainly more fear in the marketplace. But it appears that U.S. markets as measured by their stock index benchmarks are responding with an unusual degree of calmness to an adverse situation. Options traders are little more nervous about the situation in London and are bidding for puts in general. That is causing the volatility to go up as reflected by the VIX. Investors often use options to manage the risk of owning stocks, protecting themselves from a drop in prices by buying a put, or the right to sell the security at a preset price within a specified time period.

Stocks rose in late afternoon trading, recovering from early losses triggered by four blasts that killed at least 37 people in London today. The muted reaction was due to a perception that the attacks would not cause major damage to the global economic outlook. In particular, U.S. investors remembered that stocks bounced back after similar attacks, such as the train bombings in Madrid last year. People have come away from it saying it didn't really affect any of the infrastructures of the financial markets. It's pretty much unlikely to affect the economy in any way. The Dow Jones industrial average rose 20 points, or 0.20 percent, to 10,290.72, recovering from a session low of 10,175.40. The Standard & Poor's 500 Index was up 0.73 of a point, or 0.06 percent, at 1,195.67. The technology-laced Nasdaq Composite Index gained 4.57 points, or 0.22 percent, to 2,073.22. All three indexes made their way back from their early morning low, when they'd been off nearly 1 percent. Shares of insurance companies and airlines, both sensitive to disasters, remained mostly lower for the day. Investors nerves' were frayed by continuing warnings through the day, including a scare following the discovery of a suspicious package near London's Victoria station. But the stock of American International Group, the world's largest insurer and one of the 30 stocks in the blue-chip Dow average, was up 0.5 percent, or 32 cents, at $59.47, recovering from a session low of $58.52. And the stock of insurer Chubb Corp. was up 0.2 percent at $85.62; off a session low of $84.37. Retail shares gained after chain stores reported June sales were the strongest they'd been since March 2004. The S&P retailing index rose 0.6 percent to 450.20. Shares of Gap Inc. advanced 3.8 percent to $20.99 and Target Corp. shares gained 1.5 percent to $56.38, helping the S&P 500.

U.S. Treasury debt prices climbed Thursday after a series of deadly blasts in London spurred investors to scramble for the relative safety of government bonds. Yet by late afternoon in New York, the market had dropped back considerably off session highs hit immediately after the explosions, with benchmark 10-year notes yields now floating around 4.05 percent. That was down from 4.08 percent Wednesday, but up from a low of 3.94 percent hit shortly after the attacks. Traders had already begun to focus on Friday's U.S. employment report. The bond market gave up most of its gains. The focus is on tomorrow's unemployment number. Wall Street is predicting around 188,500 new jobs were created in June, up significantly from May's disappointing 78,000. Five-year notes were up 5/32 and yielding 3.83 percent from 3.87 percent, while the 30-year bond had risen 14/32 for a yield of 4.31 percent. The increase in short-term debt prices was relatively more pronounced, with two-year notes jumping 4/32 to yield 3.71 percent, down from 3.77 percent on Wednesday. Jobless claims data showed 319,000 more Americans lined up to claim unemployment benefits in the latest week, 7,000 more than the prior week. However, the Labor Department said a significant portion of the increase to seasonal layoffs in the auto industry and of temporary workers in the school system. As a result, the gains had little impact on estimates for robust payrolls gains.

Good Luck!

Commando Trader
www.CommandoTrader.com